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  • Writer's pictureYoshi from Comply

Singapore is first to adapt stable coins reg-s

Singapore's financial regulatory authority has announced the finalization of regulations governing stablecoins, positioning the country among the world's pioneering jurisdictions in this regulatory space.

Stablecoins are a category of digital currencies designed to maintain a consistent value in relation to traditional fiat currencies, often claiming to be backed by real-world assets like cash or government bonds. Currently, the stablecoin market is valued at approximately $125 billion, with Tether's USDT and Circle's USDC comprising roughly 90% of the market capitalization.

Until now, stablecoins have largely existed in a regulatory gray area globally, but Singapore's Monetary Authority (MAS) has introduced a comprehensive framework with key provisions:

1. Reserves supporting stablecoins must consist of low-risk and highly liquid assets, always equaling or exceeding the stablecoin's circulating value.

2. Stablecoin issuers must promptly return the digital currency's par value to holders within five business days upon redemption requests.

3. Issuers must provide users with "appropriate disclosures," including the audit results of their reserves.

These rules apply to stablecoins issued in Singapore, mirroring the value of the Singapore dollar or any G10 currency, such as the U.S. dollar.

Stablecoins that adhere to these requirements will be recognized as "MAS-regulated stablecoins" by the regulator, distinguishing them from unregulated tokens. Singapore, aiming to establish itself as a digital currency hub, seeks to attract foreign companies while addressing criticisms from the crypto industry regarding the U.S. regulatory framework.

Stablecoins like USDT and USDC have traditionally played a pivotal role in cryptocurrency trading, allowing seamless transitions between different digital assets without the need for conversion to fiat currencies. Proponents of stablecoins argue that they have a wide range of applications, including facilitating remittances.

However, concerns have arisen about the transparency of stablecoin issuers concerning their reserves. Singapore's regulatory framework aims to enhance transparency within the industry.

Ho Hern Shin, Deputy Managing Director of Financial Supervision at MAS, commented, "MAS’ stablecoin regulatory framework aims to facilitate the use of stablecoins as a credible digital medium of exchange, and as a bridge between the fiat and digital asset ecosystems."

Stablecoin firms Tether and Circle welcomed the new regulations, with Yam Ki Chan, Vice President of Strategy and Policy for APAC at Circle, stating, "With the new stablecoin regulatory framework, MAS is amongst a set of forward-looking regulators globally in establishing a clear and transparent regulatory framework for stablecoins and digital assets."

Paolo Ardoino, CTO of Tether, added, "This framework provides a clearer structure and establishes a well-defined path for conducting stablecoin operations in Singapore, while ensuring transparency and accountability."

Last year, the collapse of an algorithmic stablecoin called UST drew regulatory scrutiny, highlighting the need for oversight in this sector. Unlike USDT and USDC, UST was governed by an algorithm and lacked real-world assets in its reserves.

Singapore's regulatory framework for stablecoins places it among the first jurisdictions to establish such rules. In June, the U.K. passed legislation granting regulators the authority to oversee stablecoins, though specific rules have not been established. Meanwhile, Hong Kong is conducting a public consultation on stablecoins and plans to introduce regulations in the coming year.

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